Falling oil prices and the impact on housing markets September 8, - PowerPoint PPT Presentation

Falling oil prices and the impact on housing markets September 8, 2016 EMAD

Global oil market dynamics • In 2014, the U.S. surpassed Saudi Arabia to become the world’s largest energy producer. • The rise in domestic production was largely due to increased use of hydraulic fracturing and directional drilling. • Oil prices began to fall, as supply increased. Demand also began to fall, too, as global growth slowed. • Finally, a strong dollar negatively impacts oil prices.

West Texas Intermediate spot prices

Domestic producers responses • Energy companies began seeking lines of credit to bolster cash positions as revenue fell from lower oil prices. • Secondly, producers also hedged against falling prices by purchasing energy futures contracts. • In recent weeks, equity firms are starting to rethink continued support for energy producers. • Energy producers have been exercising existing futures contracts, and are now replacing these in the current low price environment, further hurting cash positions. • As a result, companies are cutting costs. For example, Shell announced it would cut 6,500 jobs from global workforce. Royal Dutch Shell, BP, Exxon Mobil, and Total are redirecting efforts to lower-cost production areas.

Rig counts (Rigdata)

Shale well production timelines

U.S. Crude Oil Production

All of this is nice, but why does the housing industry care?

Mining and logging employment trends

Home Sales (12-month rolling avg)

Oil & Ga s Na tura l Re so urc e Ma rke ts in the We st Re g io n HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston Ma n Ca mps HUD MUL T I F AMI L Y – WE ST RE GI ON

T he Building Boom HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota 1-Bedroom/700 Square Foot Unit Location Rate Per SF Williston $2,394 $3.42 New York $1,504 $2.15 Los Angeles $1,411 $2.02 Boston $1,537 $2.20 HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota Pe r mits Issue d - City of Williston 1,600 1,501 1,400 1,377 1,290 1,200 1,017 1,000 800 600 612 400 340 278 246 310 200 128 79 147 136 8 0 27 0 2009 2010 2011 2012 2013 2014 2015 2016 Apa rtme nt Units Sing le F a mily Units HUD MUL T I F AMI L Y – WE ST RE GI ON

Gille tte & Ca spe r, Wyoming HUD MUL T I F AMI L Y – WE ST RE GI ON

Oil & Ga s Produc tion – Ca mpbe ll County (Gille tte ) HUD MUL T I F AMI L Y – WE ST RE GI ON

Oil & Ga s Produc tion – Na trona County (Ca spe r) HUD MUL T I F AMI L Y – WE ST RE GI ON

Wyoming Provide s 40% of the Na tions Coa l Produc tion 8 o ut o f the to p 10 c o a l pro duc e rs in the Unite d Sta te s a re mining in Ca mpb e ll Co unty HUD MUL T I F AMI L Y – WE ST RE GI ON

Coa l Produc tion T he c lo sure o f ne a rly 100 U.S. c o a l-fire d po we r pla nts in 2015, c he a pe r na tura l g a s, a nd inc re a se d g o ve rnme nt re g ula tio ns ha ve c re a te d a sig nific a nt impa c t o n the c o a l industry. Pe a b o dy E ne rg y a nd Arc h Co a l o pe ra te the mine s in the a re a a nd ha ve la id o ff o ve r 15% o f the ir wo rkfo rc e . T his numb e r is typic a l o f the la yo ffs to AL L c o mpa nie s in the industry a nd is g ro wing . HUD MUL T I F AMI L Y – WE ST RE GI ON

Wyoming Une mployme nt Ra te s *E stima te d 8,000 Na tura l Re so urc e & Mining L a b o r F o rc e *E stima te d 4,000 Na tura l Re so urc e & Mining L a b o r F o rc e Gille tte – 6.10% Ca spe r – 6.70% 3.6% Sinc e 2015 3.7% Sinc e 2015 * 2014 Co unty-Wide E stima te s HUD MUL T I F AMI L Y – WE ST RE GI ON

Impa c t on Ne we r Multifa mily Housing Sinc e 2014 Gille tte Ca spe r 20% 25% Re nta l Ra te s: -$300 -$250 2014 Oc c upa nc y Ra te : 99% 98% 80% 2016 Oc c upa nc y Ra te : 85% HUD MUL T I F AMI L Y – WE ST RE GI ON

Ve rna l, Uta h HUD MUL T I F AMI L Y – WE ST RE GI ON

Ve rna l Une mployme nt 8.3% Sinc e 2015 HUD MUL T I F AMI L Y – WE ST RE GI ON

Impa c t on Ne we r Multifa mily Housing Sinc e 2014 Ve rna l 30% Re nta l Ra te s: -$200 2014 Oc c upa nc y Ra te : 96% 2016 Oc c upa nc y Ra te : 50% HUD MUL T I F AMI L Y – WE ST RE GI ON

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